FOREX-Euro jumps on U.S. dollar after ECB call

By Adrian Bathgate

WELLINGTON, Aug 8 (Reuters) - The euro jumped on the U.S. dollar in early Asian trade on Monday after the European Central Bank said it would 'actively implement' its bond buying programme, raising hopes it would aggressively buy Italian and Spain bonds.


Finance ministers of the Group of Seven were also having a telephone meeting to discuss events, holding out the hope of coordinated measures to calm markets.

The euro climbed to $1.4378, well up on $1.4280 in late New York trade on Friday and a long way from last week's lows around $1.4055.

The ECB's step could mark a watershed in the bank's fire-fighting after modest bond buying efforts last week failed to stem contagion, raising the prospect that the euro zone's third and fourth biggest economies could also face a debt crisis.

However, markets will look to the ECB to flesh out the details of its plans as its initial statement lacked detail and only said the bank hoped to restore 'better transmission of our monetary policy decisions'.

The greenback's fall was also aggravated by Standard and Poor's downgrade of the United States by one notch to AA-plus from the top notch AAA level, on concerns about growing budget deficits.

S&P said the decision reflected its view that the debt ceiling deal agreed last week fell short of what was needed. For stories on the U.S. ratings.

The dollar fell against the Japanese yen, last at 77.98, from 78.38 yen on Friday. It slid further against the Swiss franc to 0.7570 francs, compared with Friday's late level of 0.7671.

Over the past month, the dollar shed 6 percent against the Swiss franc and about 4 percent against the yen .

There had been fears stock markets across the Asian region would start sharply lower as the debt turmoil on both sides of the Atlantic raise fears the global economy will be tipped back into recession. Though the boost to sentiment from the ECB may help steady nerves now.

Stocks in Tel Aviv, one of the first global equity markets to open since the downgrade, dropped 7 percent on Sunday in response to S&P's action late on Friday.

Finance ministers from the Group of Seven most developed economies are set to discuss the U.S. sovereign rating downgrade and Europe's debt woes on Monday, Japanese news agency Kyodo reported earlier on Sunday.

(Editing by Balazs Koranyi) Keywords: MARKETS FOREX

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